By Tiernan Ray

Shares of Apple (AAPL) are up $1.01 at $491.65, reversing a sluggish start to the session, as a bunch of price target and estimates increases roll in, from both bull and bear, following the company’s announcement yesterday morning that it sold 9 million units of the iPhone 5S and 5C in their first official weekend of retail availability, which was more than many had been modeling.

Goldman Sachs‘s Bill Shope, reiterating a Buy rating on the stock, and raising his price target to $560 from $530, writes that the sales “exceeded investor expectations for approximately 6 million units (versus 5 million units last year).”

Shope raises his estimates for the fiscal Q4 ending this month to $36.96 billion in revenue and $7.85 per share in profit from a prior $35.05 billion and $7.31. For next year, he now models $182.7 billion in revenue and $44.11 per share, up from $179.7 billion and $42.65 previously. That’s on sales of perhaps 164.4 million iPhones, up from his prior 156.6-million estimate.

Shope writes that the number “triggered quite a debate about how much this changes the long-term story for Apple and how much of the 9 million units represented ‘real demand’,” and he attempts to address some of those concerns.

Shope writes that although there were several new factors this year versus last year’s iPhone 5 roll-out, such as the inclusion of the Chinese market in the first week of sales, things like that were known when analysts made their models, so it shouldn’t be a concern for investors.

Shope also thinks “channel fill” is not something to worry about:

Is there a channel fill component to the number? Yes. Apple’s accounting methodology for reporting first weekend sales has not changed from prior years. Nevertheless, in prior years, when Apple was only selling one new product family and the supply was exhausted by first weekend demand, channel inventory was largely irrelevant for analyzing the initial sales figures. Nevertheless, this year the company is selling two product families and the 5c appears to be in supply-demand balance; as such, we would expect Apple to have built some channel inventory and some of this would be recognized in the first weekend sales figure. In particular, inventory sold into third-party retail outlets is recognized on a sell-in basis. Nevertheless, as with most iOS product launches, we believe the majority of channel inventory was likely allocated to Apple stores, and inventory in Apple stores is not recognized as revenue until it is sold to a customer. As such, only the third-party portion of retail inventory would be part of the reported first weekend shipment figure.

Shope’s view on “sell-through” versus “sell-in” are in sharp contrast to the view of Peter Misek of Jefferies & Co., who reiterated a Hold rating on the shares this morning, and a $425 price target, writing that his review of Apple’s supply chain suggest to him total sell-through was only 6.5 million, with another 2.5 million of iPhone 5C units merely sold into non-Apple retail stores:

We believe there are 2.5M of 5c units sitting on shelves in the launch countries. We think a more apples-to-apples comparison would be comparing our estimate of 6.5M to consensus expectations of ~6M and last year’s 5M+. While 6.5M is still better than expectations and likely reflects larger initial iPhone 5s stockpile; China and NTT DoCoMo; and iPhone 4s upgraders, it is not the enormous upside that the headlines make it appear. We still see upside to CQ3 consensus estimates but risk to CQ4 consensus estimates.

Susquehanna Financial Group‘s Christopher Caso raised his rating on the shares to “Positive” from Neutral, and hiked his price target to $625 from $440, writing “When the facts change, we change our minds – and the facts over the weekend indicated that AAPL’s new phone lineup was more successful than we and many others had expected, even after accounting for the greater worldwide distribution at launch.”

Caso raised his estimates for this year to $170 billion in revenue and $39.27 per share in net profit from a prior $169 billion and $38.81, while maintaining next year’s estimate for revenue of $192 billion and raising his EPS estimate to $47.75 from $47.22.

“Our thesis all along is that we have wanted to own AAPL for what we believed to be a stronger iPhone 6 cycle. Now that the risk of a disappointing iPhone 5s launch is greatly reduced”:

The stock could yet rise on word of production increases, writes Caso, although he thinks the next product cycle, an “iPhone 6,” will be a bigger deal for the company:

We, of course, still don’t know how well sell-through will hold up through all of C4Q. But given the present shortages, we would be very surprised if the next update from AAPL’s production supply chain isn’t at least in-line with prior expectations, and most likely showing some production increases during C4Q. We think this provides the potential for a positive catalyst as supply chain changes become known to the market […] Our current supply chain checks suggest that AAPL is asking their supply chain to be ready to commence production on iPhone 6 about a quarter earlier than normal, which we estimate points to a June/July product launch. We note that Street estimates reflect less than 9% revenue growth for AAPL in CY14, which we think underestimates the potential for a significant refresh. AAPL sold 228 mln iPhone units in 2011 and 2012, underscoring the size of the user base that provides the available market for a product cycle refresh. In addition, the relatively modest launches by Samsung and other OEMs this year has in our view reduced the risk that users would depart the AAPL ecosystem for Android; rather, we think the positive reception for iOS7 makes it more likely that AAPL would attract more users to the iOS ecosystem.

And William Power of R.W. Baird, who rates the stock Neutral, raised his price target to $525 from $450, writing that he’s still on the sidelines “due to longer-term margin and competitive questions,” in particular the expected refresh of the iPad in coming weeks, and a potential deal with China Mobile (CHL), both of which he thinks could put pressure on the stock:

With an iPad and iPad Mini refresh likely in store for next month, additional gross margin pressure is still possible. Additionally, potential further iPhone 4/4S discounting in China, Brazil, and other markets could negatively impact total margins, and new product categories like iWatch and iTV could potentially be dilutive as well.

Power raised his Q4 iPhone estimate to 33 million from 30.4 million, and raised his EPS estimate to $7.94 from $7.41. For 2014, he sees a gross margin of 37.8%, higher than his prior 35.2% estimate, and raises his EPS estimate to $42.97 from $39.26.

Add a Comment

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comment

There are 12 comments

SEPTEMBER 24, 2013 12:02 P.M.

Ed wrote:

Ya, and the stock goes nowhere!! What a bunch of jerk offs.

SEPTEMBER 24, 2013 12:20 P.M.

Peter wrote:

Wow, the stock is flying after all the bogus upgrades.

SEPTEMBER 24, 2013 12:25 P.M.

EricSRox wrote:

Paging Peter Misek....Paging Peter Misek....

SEPTEMBER 24, 2013 12:25 P.M.

Jerry in MA wrote:

Misek, like all analysts, badly underestimated how many phones Apple would sell but unlike Caso he refuses to look at the facts and twists himself into a pretzel to explain away his failures. If anybody believes his "channel checks" which are probably inventions on his part, they are as mindless and deluded as he doubtless is.

SEPTEMBER 24, 2013 12:34 P.M.

lawrence wrote:

boy the analysts really hate apple. peter misek refuses to deal with the reality that he is wrong. but he has been wrong on apple all along, one year ago he had a $900 price target. and i love that william power thinks that the ipad launch and a china mobile deal are negatives for apple!?! the problem with wall street analysts is that they just put together models based on bad assumptions and information, and ignore the obvious. apple had a bad past year due to no new product releases. the coming 6 months are a goodie bag of new products for consumers and new distribution opportunities being unlocked. it is very interesting that despite raising their estimates, many analysts refuse to raise their recommendations. reminds me of stocks like netflix and tesla that were hated and then loved. better for investors to get in when the stocks are still hated.

SEPTEMBER 24, 2013 2:38 P.M.

Sam wrote:

Apple had its one day of rising, now back to normal. It will be back to 460 in 1 week.

SEPTEMBER 24, 2013 3:16 P.M.

Ed wrote:

5 upgrades, record sales, price target increases and Down We go!! only Apple does this. This company and CEO are truly hated by Wall Street. It is a Joke.

SEPTEMBER 24, 2013 3:29 P.M.

Moe Skoshi wrote:

Shades of Peter Misek, that Apple-downgrading prick. The only analyst who just had to be the first wanker to downgrade Apple right before actual iPhone sales. I hope that fool is proud of himself. Maybe Apple should hire Peter Misek as Apple's new CEO considering he seems to know how to price iPhones better than Tim Cook.

SEPTEMBER 24, 2013 3:49 P.M.

Peter wrote:

Netflix, Google, Priceline, Tesla, or Amazon would be up 20% the last 2 days if they reported the news that Apple did yesterday. Instead, Apple up a whopping 4%. What a complete Joke.

SEPTEMBER 24, 2013 5:01 P.M.

Sean wrote:

So let me get this straight... R.W. Baird says that a China Mobile deal, new iPads, iWatch & iTV would be bad for the stock?? Wow? Some people just will not give credit where credit is due...

SEPTEMBER 24, 2013 5:29 P.M.

Re Peter Misek. Definition of a PERVERTED ANALYST... wrote:

What is obviously GOOD has to really be bad. Yep. That's the mentality. And what is grotesquely BAD is actually pretty good. Please put this in Version 6 of the next DSM. Hmm. Call it Misekism for the Misekists.

SEPTEMBER 25, 2013 5:06 P.M.

Avi wrote:

There are so many concerns with Apple, there's Amazon, Samsung, Google's Android and the mongoloids on Wall Street both analysts and traders. You just can not judge Apple, by sales or earnings or customer satisfaction, or huge cash stash on the balance sheet, high margins, brand loyalty, very low P/E etc., Those are not the right metrics to judge by, when it comes to Apple. I would presume, those that hate the stock are the same jerks, that missed out and are now trying to drive it down. I hope the shorts get crushed one of these days.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.